Business Tenancies and the impact of Covid-19

The Coronavirus Act 2020 was introduced by Parliament by 19th March 2020 and subsequently received Royal accent on 25th March 2020 (the commencement date). 

A link to the Act is attached http://www.legislation.gov.uk/ukpga/2020/7/contents 

This note is to assist commercial Landlords and Tenants as arising from a very difficult and rapidly evolving situation.

Section 82 of The Coronavirus Act 2020 provides tenants with a period of protection against eviction for non payment of rent. The period of protection lasts until 30th June 2020 unless otherwise extended by further legalisation.

The protection for commercial tenants for non payment of rent under The Coronavirus Act 2020 applies to a business tenancy to which Part 2 of the Landlord and Tenant Act 1954 applies. Tenants often agree to contract out of the Act and the special protection afforded by Section 82 of The Coronavirus Act 2020 will also apply to tenancies that are contracted out of the 1954 Landlord and Tenant Act.

The protection provides a temporary moratorium which allows commercial tenants to remain in the premises until 30th June 2020 or a later date if subsequent legalisation is enacted.

This moratorium applies to the Right of Re-entry for forfeiture under a business tenancy for non payment of rent and such actions in forfeiture cannot be enforced during the relevant period which ends presently on 30th June 2020.

The protection afforded to commercial tenants under The Coronavirus Act 2020 does not release the tenant from the obligation to pay rent nor does it postpone the date on which the tenant is required to pay rent. Section 82 of The Coronavirus Act 2020 simply provides a bar on enforcement action until the end of the relevant period.

The protection afforded to commercial tenants under The Coronavirus Act 2020 only applies for forfeiture for non payment of rent. It does not prohibit the service of notices pursuant to Section 146 of the Law of Property Act 1925 for other breach of covenant or indeed for forfeiture proceedings based upon breach other than for non payment of rent.

Furthermore a Landlord would still have the right to commence proceedings to seek a monetary Judgment against the tenant for rent arrears although that, together with proceedings for forfeiture on grounds other than rent may be subject to practical difficulties most notably progressing such matters through the Court system at present.

As a consequence of The Coronavirus Act 2020 delayed payment of rent will not be construed as a waiver of the tenant’s contractual obligations save in circumstances where an express waiver in writing is agreed by the Landlord.

The Coronavirus Act will impact upon Landlords and Tenants seeking to negotiate new leases under Part 2 of The Landlord and Tenant Act 1954. The special protection conferred by Section 82 does not generally affect the right of landlords or indeed tenants to seek to terminate or renew business tenancies however if the landlord’s opposition for the renewal of a tenancy i.e. that there is a persistent delay in paying rent, will mean that failure to pay rent during/under Section 82 of The Coronavirus Act 2020 will be disregarded.

These are undoubtedly very difficult times for both Landlords and Tenants.